Rising Wages Could Lead to More Inflation

Strong consumer spending over the past year has been boosted by government stimulus programs but will rely more on the labor market and job creation as the benefits of those efforts subside, National Retail Federation Chief Economist Jack Kleinhenz said last week. Meanwhile, higher wages that employers have had to pay as they struggle to fill job openings could lead to more inflation in coming months.“Consumer spending is currently far above pre-pandemic levels thanks to unprecedented monetary and fiscal policies that have backstopped demand by putting money into wallets,” Kleinhenz said. “But as the economy moves forward into the later months of 2021, federal aid will be tapering off and there will be an important focus on the ability of the labor market to generate ongoing strength in wages and salaries to support spending. U.S. consumers remain in the mood to spend but the labor market and job creation will play an increasing role in their ability to do so.”